Ford beating General Motors in race to Europe turnaround

“What investors are looking for is getting comfortable with the sustainability of those margins and figuring out exactly how much higher they could go,” Joseph Spak, an analyst with RBC Capital Markets, who rates Ford the equivalent of a buy, said in a telephone interview.

Demand in Europe fell 7.8% last year to 12.5 million vehicle registrations, the lowest in 19 years, the European Automobile Manufacturers’ Association, or ACEA, said this month. Ford’s registrations plunged 13% to 939,409, according to the Brussels-based trade group.

The story is quite the opposite in North America. Record profits there buttressed Ford’s bottom line in the first nine months of last year. The automaker earned $6.47 billion before taxes in the region in 2012’s first nine months, more than it made there for all of 2011. North America had an operating profit margin of 11.2% during the period in an industry where a 5% margin is respectable.

‘Wonderful’ Profitability

“We’ve had a wonderful nine months, in terms of profitability, margin and generating very positive operating cash flow,” said CFO Shanks. “I think the path that we’ve been on will continue.”

Chief Executive Officer Alan Mulally, 67, revived Ford after arriving in 2006 from Boeing Co. by using $23.4 billion that the company borrowed late that year to overhaul its lineup with fuel-efficient models such as the Focus and Fiesta. Those efforts were preceded by plans to restructure the company’s North American operations beginning in October 2005, Shanks said.

“If we had not started then, if we had waited until the overall economic crisis was evident, we would not have been ready for it,” he said. “That’s another interesting learning on Europe -- there was no evidence from the outside when people looked at what we were doing that we were making any progress.”